President Hosni Mubarak dashed the hopes of hundreds of thousands of Egyptians waiting for what they thought would be his resignation speech last night by defiantly announcing that he would not bow to domestic or foreign pressure to quit.

In a televised address that has set the stage for further confrontation on the streets – as well as heightened tensions with the US – Mubarak said he would hand powers to his deputy, Omar Suleiman, but would stay on as president, with his regime controlling the transition to free elections.

Although he appeared to have surrendered much of his power, Mubarak said he will stay in office until an orderly transition to an elected government, planned for September. He repeated a pledge not to seek re-election and said there was no going back on a commitment to long-term political reform, after the two weeks of protests demanding his resignation.

But while the president’s surrender of his legal powers was a significant concession, unthinkable just a month ago, it fell far short of the demands of the shocked crowds packed into Cairo’s Tahrir Square, the centre of protests against Mubarak’s 30-year rule. In a day of growing euphoria, many had come to believe he was about to resign entirely after senior government politicians predicted as much.

The president’s defiant tone and attempts to paint the revolt as inspired by foreign interference angered the crowds. As the mood turned sour, protesters waved their shoes, a sign of contempt, and chanted: “He must leave” and “We’re off to the presidential palace. We’re going as millions of martyrs.”